Call for probe into Yorkshire Bank loan activities

Clive Betts.

Bernard Ginns Business Editor

A LABOUR MP has written to the Parliamentary Commission on Banking Standards to express “grave concerns” about Yorkshire Bank’s activities in the commercial property market.

Clive Betts, MP for Sheffield South East, has urged Andrew Tyrie, chairman of the commission, to investigate the current policy and practice of the Australian-owned lender.

In his letter to Mr Tyrie, Mr Betts said he has been contacted by a number of past and present customers with claims that Yorkshire Bank is “aggressively calling in loans that have not yet reached their termination date”.

He said many of the customers have asked that their details be passed on to the commission.

Yorkshire Bank said commercial property loans continue to be managed in line with contractually agreed terms.

The lender and its sister Clydesdale Bank transferred £5.6bn of commercial property loans to the balance sheet of their parent, National Australia Bank, last October. The portfolio reduced by £300m during the first quarter, which has been attributed to loans reaching maturity or exits from customers transferring to other lenders.

Mr Betts said: “The past and present customers who have contacted me have varying stories to tell but almost all of them maintain... that the bank has sought to pressure them into repaying agreed loans in full and transferring their accounts to another bank.

“The pressure applied has been various, but particular attention has been drawn to the bank seeking revaluations of property with a view to invoking the value to loan clauses common to many such loans.

“Allegations of mis-selling of such products correspond to the concerns raised by the Financial Services Authority about interest rate hedging products by this and other banks.”

The FSA said this month that a pilot study found more than 90 per cent of interest rate hedging products sold to small businesses by Yorkshire and Clydesdale broke regulatory requirements.

A spokesman for Mr Betts said a dozen companies have contacted the MP to complain about their treatment since he first publicly raised concerns about the lender in the Yorkshire Post in December.

At the time, Mr Betts threatened to report the bank to the commission over its decision to pull out of commercial property lending and the alleged mis-selling of loans to SMEs. He claimed that the bank’s activities could deliver “a real blow to Yorkshire’s economy”.

In his letter to Mr Tyrie, he said Yorkshire and Clydesdale failed to respond to repeated requests for clarification about concerns over potential mis-selling and “the methods employed by the bank in seeking to withdraw from the commercial property market” in spite of his threat to refer the matter to the commission.

He added that Yorkshire Bank “has begun to express a wish to negotiate more flexibly and reasonably” with some companies although settlements have not been reached.

Barry Gardner, spokesman for Yorkshire Bank, said: “We are happy to meet with Mr Betts to discuss the points he has raised, however, transferred commercial property loans continue to be managed in line with contractually agreed terms. Any customer with a complaint should contact us to enable us to investigate.

“We also remain fully committed to the review of agreed interest rate hedging products and proactively worked with the FSA during the pilot review process.

“We announced earlier this month that, subject to regulatory approval, we will start contacting customers with an in-scope product, prioritising those with the greatest need.”

A spokesman for the Parliamentary Commission on Banking Standards declined to comment.

Mission to reform industry

THE Parliamentary Commission on Banking Standards was set up to look at how to reform Britain’s scandal-hit financial services industry.

The Joint Committee of the House of Commons and House of Lords has heard evidence from senior executives from Britain’s top banks.

It has looked into allegations of mis-selling and cross-selling of products to SMEs.

The commission also heard from the Chancellor George Osborne and top officials from the Financial Services Authority and the Bank of England.

It is understood that the commission will report its findings and recommendations in the coming months.

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